Black's 'insolvent' Ravelston files for protection

If the court grants Ravelston protection, it will cast into doubt Lord Black's ability to pay more than $59-million in retirement benefits to employees, $3.2-million in Ontario taxes and $3-million in fees owed to service professionals.

The Globe and Mail
April 20, 2005

Black's 'insolvent' Ravelston files for protection
Jacquie McNish and Richard Blackwell

Conrad Black's storied private holding company, Ravelston, has filed for bankruptcy protection from its creditors, a move that signals the jet-setting press baron is running out of financial resources.

According to an affidavit filed by Lord Black's long-time deputy, Peter White, in Ontario Superior Court yesterday, Ravelston Corp. Ltd. and a subsidiary, Ravelston Management Inc., are seeking protection under the Company Creditors Arrangement Act because they are "insolvent" and faced with "an immediate financial crisis."

The court is set to hear the application today.

Mr. White said Ravelston has been drained of cash because it no longer receives multimillion-dollar management fees from its subsidiaries Hollinger Inc. and Chicago-based newspaper operator Hollinger International Inc.

Most of the fees were halted in 2003 after a special committee of Hollinger International directors alleged that Lord Black and a team of executives had improperly received more than $30-million in payments.

Since then, the executives have faced additional allegations of securities fraud by U.S. and Canadian regulators.

They are also under criminal investigation by the U.S. Justice Department.

If the court grants Ravelston protection, it will cast into doubt Lord Black's ability to pay more than $59-million in retirement benefits to employees, $3.2-million in Ontario taxes and $3-million in fees owed to service professionals.

Ravelston also faces legal claims from Hollinger Inc. and its shareholders, who argue it owes tens of millions of dollars in unpaid loans.

If bankruptcy protection is granted, it remains unclear how much control Lord Black would continue to exercise at Ravelston. One Hollinger shareholder applied more than a week ago to have a receiver seize control of the company from Lord Black on the grounds that he allegedly has not repaid Ravelston's debts to the company.

Ravelston has substantial assets through its controlling stakes in the Hollinger companies, but a company spokesman said in a statement last night that it is unable "to realize value from, or exercise effective control of, those assets" because of recent legal reversals.

The Ontario Securities Commission recently blocked a bid by Ravelston to buy full control of Hollinger Inc., after shareholders protested they lacked sufficient financial data to evaluate the bid.

As part of its application, Ravelston has asked the court to appoint a receiver to oversee the companies' assets and debts.

Ravelston's move for court protection is the latest sign that Lord Black is pressed for cash. Real estate sources in New York said he recently put up for sale his co-op on New York's Park Avenue, which he purchased in 1998 for $3-million. Lord Black is also believed to be weighing the sale of his home on Palm Beach's South Ocean Boulevard, which he bought in 1997 for $9.9-million.

It was reported this month that he sold his 10-bedroom London townhouse, where he and his wife Barbara Amiel regularly entertained British prime ministers, actors and supermodels.

He is under pressure to raise cash because of a pending payment on a personal loan and a key reversal in a U.S. court. Under terms of a $32.3-million loan from Quest Capital last year, Lord Black is paying an unusually high interest rate of nearly 13 per cent. An interest payment of more than $4.1-million is owed on the loan in July.

If all the properties are sold, Lord Black will be left with an estate in Toronto, which he inherited from his parents. Although Lord Black is currently believed to be in Palm Beach, he and Ms. Amiel have resided largely in his Toronto residence during the past two years.

Legal sources said Lord Black may also be forced to pay millions of dollars in legal fees as a result of a decision yesterday by Delaware's Supreme Court, which rejected his application to appeal a 2004 court decision that sharply restricted his control of Hollinger International.

The cost of Mr. Black's Delaware legal team, which included some of the priciest litigators in the United States, was largely paid by Hollinger International as part of the company's liability insurance.

But experts said that in the wake of yesterday's Delaware reversal, Hollinger International may be entitled to demand that Lord Black repay the fees to the company.

According to securities filings, Lord Black is Ravelston's largest shareholder with a 60-per-cent stake. His long-time lieutenant, David Radler, is listed as owning 14 per cent. Other shareholders include Mr. White and former Hollinger executive Jack Boultbee.

Ravelston is a private Toronto holding company that has been at the epicentre of Lord Black's sprawling corporate empire since he first wrested control of the private company from the widow and sister-in-law of the legendary corporate captain Bud McDougald after he died in 1978. The controversial transaction gave Lord Black control of the Argus empire, which then included such companies as Massey Ferguson and Dominion grocery stores.

Over the years, hundreds of millions of dollars in management fees, dividends, loans and corporate assets have flowed to Ravelston from Argus and later the Hollinger empire. Financial transactions were difficult to unravel because Ravelston has always been a private company and therefore not required to report its financial inner workings.

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